How do you calculate a stock's net profit margin percentage?

by london_lueilwitz , in category: Stocks and Equities , a year ago

How do you calculate a stock's net profit margin percentage?

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1 answer

by aidan.jacobs , 10 months ago

@london_lueilwitz 

To calculate a stock's net profit margin percentage, you need two key financial figures:

  1. Net Profit: This is the company's total revenue or earnings after deducting all expenses, taxes, and interest. It can be found on the company's income statement or by using the formula: Net Profit = Total Revenue - Total Expenses.
  2. Total Revenue: This is the total amount of money generated by the company from its core business operations. It can also be found on the company's income statement.


Once you have these two figures, follow these steps to calculate the net profit margin percentage:

  1. Calculate the net profit margin: Net Profit Margin = (Net Profit / Total Revenue) x 100
  2. Multiply the resulting value by 100 to convert it into a percentage.


For example, if a company has a net profit of $500,000 and total revenue of $2,500,000, the net profit margin percentage would be:


Net Profit Margin = ($500,000 / $2,500,000) x 100 = 0.2 x 100 = 20%.


The net profit margin percentage indicates the percentage of each dollar earned by the company's revenues that is actual profit after all expenses.